April 23, 2014

Amazon and Retail

You can't go anywhere this morning without somebody pointing you to the analysis researchers performed on the impact of sales tax at Amazon (click here to read the article via the NY Times ... or click here to read the article yourself).

The NY Times article suggests that "at this point, there is little that will bring online shoppers back to bricks 'n mortar stores." That statement is left hanging, without any facts or data to support the hypothesis. It requires us to ask a few questions.
  • Why do 85% or more of all sales still happen in stores, given that the vast majority of customers have placed at least one online order in the past twenty years, and therefore, are considered online shoppers, and therefore become shoppers who won't go back to bricks 'n mortar stores?
  • The article suggests that Amazon is learning hard lessons about customer loyalty and price. Really? Is an increase in sales in 2013 to seventy-four billion ($74,000,000,000), a 22% increase over 2012, something that you consider a "hard lesson"? Did your business increase by anywhere near 22% last year? If so, you learned hard lessons, didn't you?!
We confuse price with utility.

Apple charges sales tax everywhere, thanks to their retail presence. And yet, you buy an iPad and you pay a 2x premium over a comparable Samsung item. Why? Why do you willingly ignore the industry narrative when buying devices from Apple?

If Amazon has an enormous advantage over retailers because of sales tax, then you have to make the same argument for catalogers ... yes CATALOGERS ... who have an enormous advantage over retailers because of sales tax. And yet, catalogers don't grow in an unfettered manner, do they? Nobody writes articles about the unfair advantages that 22,000 catalog companies have over retail brands.  Why hasn't Garnet Hill risen to lofty levels, enabling them to crush retail competition? Be honest!

I'm asking you to think about the real reasons that you, the marketing professional, shop Amazon over a retailer or anybody else for that matter. It's not a sales tax issue. Be honest with yourself.